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Strata law and the Agency Agreement

12 February 2018

As a strata manager you have rights and obligations, but the new strata reforms have raised a number of important questions in relation to the Agency Agreement.

A recent webinar with REINSW two strata experts – Leisha de Aboitiz, Partner at Massons and Gary Adamson, Principal of Strata Management Services NSW – outlined a series of Agency Agreement issues to be aware of.

They also highlighted the key protections in the agreement for a strata manager, and offered practical and legal insights on how to proceed in specific circumstances under the new strata legislation. 

Leisha said: “The Agency Agreement is a legal document so you should always tailor it to your specific needs and review it in the context of legal advice.” 

What are some of the key terms of the Agency Agreement?

Clause 5: The term

What are your obligations under the law and how can Clause 5 work for you?

“There are a number of options in relation to how you can set things up,” Gary explained. 

“The majority of agencies - prior to the new legislation coming in - had fixed terms and a three-month carryover clause. Now more agencies are moving towards a requirement for the Agency Agreement to continue until the Annual General Meeting.”

Clauses 6-9: Capturing fees

How can you use your agreement to recover maximum fees? 

Specific schedules have been placed in the Agency Agreement to ensure it moves closer to a professional services agreement, enabling you to recoup fees for more of your time.

“We’re now moving towards a proposal to have the industry recognised on a federal basis as a profession, which will provide a range of additional benefits,” Gary said. 

“Over many years the industry has simply relied on fixed fees. When you look at other professions such as solicitors, accountants, financial advisors, they moved towards a situation where their charges are based on the time they spend.”

Clause 18: Disclosures

What are your obligations and how does the Agency Agreement help you navigate this?

This relates to Section 57 and your obligations for disclosure of rebates, discounts, commissions, benefits or training services.

“It’s quite broad and you should consider that definition in detail if you’re concerned about whether or not something falls within that threshold,” Leisha advised.

“I would be advocating full transparency and disclosure at every turn, and that’s also helpful for you in making sure it’s captured under the exceptions in the legislation. However, it’s important to know that just because it’s been disclosed it doesn’t mean it will be accepted.

“If it’s not accepted, then what’s been built into this Clause is an ability for you to re-cut what your fee is.”

Feedback from NSW Fair Trading

NSW Fair Trading has been asked to provide feedback and clarification on key terms in the REINSW Exclusive Management Agency Agreement which relate to the new strata reforms, including:

The capital works plan

Issue: Very broad.

Feedback: Concerns about developing what might be a problematic standard form capital works plan. NSW Fair Trading has indicated a willingness to consult with industry.

Disclosures and gifts

Issue: Does Section 57 of the Act refer to a per-company or per-strata manager gifts in terms of the $60 threshold? Who exactly does it apply to? How does it work when allocated across a variety of schemes?

Feedback: If the question concerns the gift threshold it would be on a per-strata manager basis, not per-company. Further clarification is also being sought on the relevant details.

Exercising delegated authority and keeping records

Issue: To what extent must strata managers keep records?

Feedback: There has always been an obligation to keep good records and this should continue. Clarification is being sought on whether ‘ordinary’ record keeping in the course of everyday business (e.g. receipts, file notes, sent emails etc.) will suffice under the new legislation.